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The office rental market has been reactivated: Which companies are asking for them and what is happening with the prices
December 7, 2023
The corporate real estate market is experiencing a gradual recovery. The sectors that show the greatest interest are looking for spaces with exterior connections and that are in the northern corridor of CABA and Greater Buenos Aires.
By José Luis Cieri
Offices are threatening a recovery and there is an injection of optimism in the corporate real estate market in the face of the coming change in the political and economic cycle.
Days before the inauguration of president-elect Javier Milei, experts in the corporate real estate market indicated that there was a notable increase in inquiries. Gradually, the segment shows a recovery in both demand and the completion of rental operations. The continued preference for offices with an area of 500 square meters stands out.
This is attributed to the fact that thanks to remote work, companies do not need to locate all their employees in a single space. The perception of office space as an area designed for collaborative work is increasingly consolidated, beyond simply being a place to accommodate the maximum possible number of desks.
Analysis of Milei's next administration suggests that he will implement a shock policy followed by stabilization, with the aim of revitalizing the economy as quickly as the social and political context allows.
Nicolás Ferrero, research manager at CBRE, told Infobae that, if this materializes, it is likely that after an economic disclosure that causes a pronounced drop in activity, a real economic recovery will be in sight in the medium term. If the stabilization plan is executed successfully and the opening to the markets, backed by the confidence generated, manages to attract new investments to the country, a sustained improvement in the sector is expected in the long term.”
The office market maintains its dynamism, demonstrating resilience after the significant impact caused by the pandemic and the economic conditions that led numerous companies to abandon their large work spaces.
There are ready-to-use offices that are the most sought after today due to demand
Mariana Stange, CEO of Mariana Stange Real Estate, highlighted to Infobae that a spirit of persevering work currently prevails that drives activity: “Despite the economic challenges and uncertainty that marked much of the year, the market exhibited constant progress. This movement persists after the elections, and although it is premature to draw definitive conclusions, an increase in consultations and, therefore, in visits has been observed in recent weeks.
Office searches today come from various areas, depending more on the particular situation of each company than on the sector as a whole.
“However, sectors such as banking, finance, technology and pharmaceuticals are constant in consultations. Currently, companies may be considering relocation due to the hybrid work model, which has allowed them to downsize. Current prices are more compressed than in the past, providing the opportunity to make a leap in quality by going from a lower category asset to a premium one,” said Ferrero.
Rotation
In recent years, companies have taken the opportunity to downsize their offices, thereby reducing their fixed operating expenses.
Preferences look towards the northern area of Buenos Aires and Greater Buenos Aires
“Currently, there is a growing need for office spaces by companies, but the search is focused on smaller areas, with an average of around 500 m2, compared to the previous areas of 1,000/1,500 m2. Previously, location and connectivity were the main criteria when searching for properties, while now offers that also include outdoor spaces and amenities within the building itself are prioritized,” Ferrero explained.
The most demanded plants are those that do not require initial investment, with alternatives being those called “plug & play”, which translated means: ready to occupy.
Stange noted: “Spaces returned by tenants due to new ways of working are now rented by companies that value architecture and design. During 2022 and 2023, many spaces were rented and sold, leaving some surfaces available, especially in the city center. The most sought-after areas are single-story, with average rental values of USD 18-22 per m2 plus VAT and expenses.”
Zones and values
The preference persists for occupying surfaces with exterior connections in the northern area of Buenos Aires, covering Palermo, Colegiales, Núñez, Belgrano and Saavedra, as well as the axes of Avenida del Libertador and Panamericana in the north of Greater Buenos Aires (GBA).“Values remain stable, especially in areas such as Palermo, Belgrano and Núñez, where they returned to pre-pandemic prices. The premium category recovered quotes, exceeding USD 30 per m2. Despite the high vacancy, the Center still presents office rental opportunities in excellent condition at competitive values, according to Stange.
Modern office buildings with spaces that face the outside are preferred.
Rents remained similar, showing a year-on-year drop of 2.5% in some corridors. The average value for the Class A/A+ office market is USD 22.50 per m2. In northern GBA, it is USD 22, while Retiro, Catalinas and Microcentro are positioned at USD 22.31, and the northern area of CABA reaches USD 26 per m2.
Agreements
The contracts have a duration of 36 months with an option for 5 years in total; In cases of longer contracts, such as those of 60 months, the value is established for the first 36 months, leaving the remaining 24 months open to negotiation.Stange pointed out: “We sign contracts in dollars (at the Banco Nación exchange rate) fixed or with slight annual adjustments. The majority is made in pesos with quarterly adjustment by the Consumer Price Index (CPI).”
It is generally agreed that the tenant will assume all expenses of the property, including property taxes, building insurance and maintenance costs. These costs are added to rent and utilities.
“In CABA, a garage is usually included for every 100 m2 rented; This modality may vary in GBA,” concluded Ferrero.
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